Q. How do I make a charitable donation without money?
A. The tax benefit on annual donations in excess of $200 made by December 31st is equivalent to the top marginal tax rate in your province of residence, regardless of your marginal tax rate. Effective July 1, 2012, the top rate in Ontario has increased from 46.41% to 49.53% if your 2012 taxable income is over $500,000. The annual donation limit is 75% of your net income with a 5-year carryover.
If you have securities, you may consider selling some of them to obtain the cash to make the donation. If they have appreciated in value since you purchased them, their sale will trigger a capital gain subject to tax at about 23.2% if your taxable income is over $132,406 but below the $500,000 taxable income level. With the donation tax credit at the top rate, you are ahead. If you have net capital losses in any of the three prior years, you may apply those losses to the 2012 gain to lower your 2012 tax liability.
To avoid the tax on the capital gain, you should consider donating them in-kind to the charity for them to sell. Capital gains realized from the donation of publicly-listed securities are not included in your net income.
By donating the securities to the charity, not only do you save tax on the capital gain, you have also lowered your exposure to the OAS clawback if you are in receipt of old age security.
You should consult with your professional advisor on all related matters